Why do Malaysians feel cost of living is high despite low inflation?

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Disconnect Between Official Inflation and Consumer Perception of Rising Costs in Malaysia

Despite Malaysia's official inflation rate standing at a seemingly low 1.1 per cent in October, many Malaysians continue to report a high cost of living. This discrepancy can be attributed to the broad definition of "cost of living" and the uneven impact of price changes across different household income groups, as highlighted by the World Bank. Furthermore, underlying economic factors such as wage stagnation and a shortage of affordable housing contribute significantly to the financial strain experienced by many citizens.
Varying Inflation Experiences Based on Household Spending

Official inflation figures often fail to capture the diverse experiences of individual households. For lower-income households, a substantial portion of their budget is allocated to essential goods like food. When food prices escalate at a faster rate than other goods and services, these households will inherently experience a higher effective inflation rate, even if the overall national average remains low. This divergence in spending patterns means that a single national inflation figure does not accurately reflect the price pressures faced by all segments of the population.
Wage Stagnation and Affordable Housing Shortage Exacerbate Financial Pressures

Beyond immediate price increases, the World Bank's "21st Malaysia Economic Monitor — Making Ends Meet" report points to persistent issues of wage stagnation and a critical shortage of affordable housing. These structural challenges mean that even with modest inflation, many Malaysians find it increasingly difficult to make ends meet. The inability of incomes to keep pace with the cost of essential items, coupled with the high cost of securing adequate housing, creates a pervasive sense of financial insecurity and rising living expenses.
Need for Structural Reforms Over Generalised Policies

Addressing the perceived high cost of living requires more than generalised measures. The World Bank suggests that structural reforms targeting the root causes of these issues are more effective, albeit slower to yield visible results. Such reforms could include initiatives to curb monopolistic practices that drive up prices, strengthening social safety nets to provide better support for vulnerable populations, and fostering sustainable income growth that is directly linked to productivity increases. These targeted interventions aim to tackle the underlying economic factors contributing to the disconnect between national economic indicators and the daily financial realities of Malaysians.

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Why do Malaysians feel cost of living is high despite low inflation?

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